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New standard to have revenue implications: KPMG

The new accounting standard issued by the IASB could change the point when companies recognise revenue, according to KPMG.

News Michael Masterman 28 May 2014
— 1 minute read

Kim Heng, audit partner at KPMG, said companies that sell products and services in a bundle, or those engaged in producing products that take a long time to complete, could see significant changes to the timing of revenue recognition.

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Ms Heng identified telecoms, software and construction as industries likely to be effected.

“For those in the telecom industry, it is likely that more goods and services will be separately identified in a contract, possibly resulting in earlier recognition of revenue” she said.

"Those in the software industry with licences requiring them to maintain or enhance the software may see more deferral of revenue.

"Companies in construction industries such as property development and contract engineering could see either more deferral or earlier recognition of revenue, depending on contract terms and property law,” said Ms Heng.

While some sectors will be more directly affected than others, all companies will need to assess the extent of the impact so that they can address the wider business implications, according to Ms Heng.

"The new disclosure requirements are extensive and might require changes to systems and processes as companies seek to collect the necessary data – even if there is no change to the headline numbers in the financial statements,” Ms Heng said.

The finalisation of the revenue standard will enable some key AASB initiatives on not-for-profit income and grantor service concession accounting to progress, according to KPMG.

The new standard takes effect in January 2017, though companies which use International Financial Reporting Standards (IFRS) can choose to apply it earlier.

"An early decision will allow companies to develop an efficient implementation plan and inform their key stakeholders,” Ms Heng said.

New standard to have revenue implications: KPMG
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